Santiago Seage - CEO Eduard Soler - EVP and CFO.

John Quealy - Canaccord Genuity Andy Gupta - HITE Hedge Andrew Hughes - Bank of America Merrill Lynch Sean McLoughlin - HSBC.

Good morning ladies and gentlemen. Welcome to the Abengoa Full Year 2014 Earnings Conference Call. Abengoa Yield is a total return company that owns a diversified portfolio of contracted assets into energy environment sectors, in North America South America and Europe.

Abengoa Yield focuses on providing predictable and growing quarterly dividend or yield to shareholders. Just a reminder, that this call is being webcast live on the Internet and a replay of this call will be available at Abengoa Yield's corporate Web site at www.abengoayield.com.

Joining us for today's conference call is Santiago Seage, Chief Executive Officer; and Eduard Soler, Executive Vice President and Chief Financial Officer. As usual at the end of the conference call, we will open the lines for the Q&A session. I will now pass you over to Mr. Santiago Seage. Please go ahead sir..

Thank you very much. Good morning everybody and welcome to ABY's 2014 results presentation. As a summary, our 2014 results that we published earlier this morning are in line with expectations, with a very solid performance in terms of cash available for distribution for the period.

As you can see on Page 5 of the presentation and we have been able to achieve revenue north of $90 million in the last quarter of 2013, with total revenues for the year above $360 million. In terms of EBITDA last quarter $81.6 million with the total year around $308 million.

This shows obviously a very significant growth versus the previous year and shows that the business is performing very well and in line with expectations. We have been able in the fourth quarter to generate cash available for distribution, which as you know is our key metric of $28.4 million, for a total since the IPO of $56.5 million.

In terms of the earnings per share our Board of Directors has approved a dividend for the fourth quarter of 2014 of $0.259 per share as per respective time communicated to our investors in our last update in November, so in general solid results no surprises.

If we take a look at results by geography and by sector on Page 6, what we see is that the key geographies have performed in 2014 in line with expectations with North America delivery in revenues close to 200 million with an EBITDA of around 175 million, South America $83 million in revenues, 77 million in terms of EBITDA and Europe 83 million revenues with 55 EBITDA, in the cases of North America and South America very high growth versus the previous year, thanks to the fact that we have new assets coming on line during 2014.

By sector, renewable energy very high growth again, reaching 170 million in terms of revenues with $138 million in terms of EBITDA. In conventional $119 million with 102 EBITDA and transmission our third segment reaching $73 million revenues with 68 EBITDA, so a good performance across geographies and sectors.

From an operational point of view on Page7, what we see is that in renewable energy we were able to generate more than 900 gigawatt hours which is very high growth versus the previous year, in conventional we have been able to reach close to 2,500 gigawatt hours, again a significant growth versus 2013 and a very high availability higher than expected.

In transmission availability has been in the 99 specifically in 99.1% including the new assets we brought online during the year. If you move to our debt position, by year-end we have a net debt position at holding level of around $223 million and net project finance debt in our operating subsidiaries of around $3.6 billion.

If we compare this leverage particularly the one at holding level that is the one that is more relevant for us we are well below our target of always being below three times net corporate debt to cash available for distribution target in particular we're between 1.5 and 2.2 in that that metric depending even is in good or not in the calculation the acquisition of the second dropdown that we just announced after December 2014.

If we move to the next page, we show our net debt bridge of our financial position, during the last quarter of 2014 we started the period with around $2.2 billion of net debt it was completely in -- we only have debt in our project in our operating subsidiaries.

Then, during the period when Mojave came online when Mojave reached COD we consolidation Mojave so that means that we are having roughly $820 million of additional debt. And then we make the -- we completed the acquisition of our first dropdown and that added additional $550 million of net debt.

In addition during the last quarter we issued few pieces of corporate debt, number one is the, a bond a higher bond, number two is a credit facility, we used that corporate debt to make the first dropdown acquisition and that adds additional $312 million of net debt.

Then obviously we have generated cash during the period which reduces the net debt of $114 million and obviously we have paid interest and we have paid dividend the dividend corresponding to the fourth quarter of 2014 that was paid by mid December 2014.

So we are closing the year with a total net debt position on a consolidated basis including both corporate debt and project debt of around $3,847 million.

Since the IPO, if we can move to next page, which shows the cash generation since the IPO within the second half of 2014 we have generated $150 million of operating cash flow including interest paid and then we have invested around $256 million mainly coming from the first dropdown that we completed during the year as I mentioned and we have received net proceeds from financing of around $295 million which mainly includes the corporate debt we have raised net obviously of the payment of debt that we have also done.

If we take into account minor FX differences that is $6 million which brings the net changing cash into around $137 million. If we talk now about our acquisitions potential for new acquisition and ROFOs going forward.

In first place we have been able on Page 2 to complete our first set of acquisitions ahead of plan in 2014 specifically we have acquired three assets -- three dropdowns from Abengoa, two solar assets on our wind farm all of those acquisitions were closed before year-end in 2014 for a total purchase price of $312 million.

Additionally, we announced recently a second dropdown an agreement with Abengoa under which we expect to be purchasing four assets including two solar, two water plants desalination plants that have already been acquired and this has been closed and we also expect acquire a stake in a solar plant in Abu Dhabi plus a stake in solar plant in Spain, Seville Energy and transmission line.

All of these acquisitions should have a purchase price of around $140 million with an incremental cash available for distribution of $14 million.

Our expectation is to have closed two-thirds of these acquisitions in the coming days including Seville Energy and for the other assets the transmission line and the solar plant in Abu Dhabi we need to obtain authorizations from several parties and our expectation would be to able to make these acquisitions in the coming two or three months.

Regarding future growth, we believe that we have a very favorable environment to continue growing through acquisitions and to do that from two sources. Number one, Abengoa will continue being for us our main source of acquisitions, because we believe that we have a very good framework to be able to reach agreements with Abengoa for future dropdowns.

And in fact, we are now as we have made public already we are in the process of negotiating our third ROFO it is still under negotiation, this ROFO will most likely include the 12% call option for $100 million of equity that we agreed in late 2014.

And beyond that, our framework ROFO agreement allows us to continue growing, because we believe that we are very complementary for Abengoa and for whatever investment vehicles Abengoa develops in the future, specifically Abengoa announced recently that we're creating an investment vehicle called APW-1 with our financial partner and that some of their assets under construction or development are going to be built through this vehicle.

This vehicle will be signing the same ROFO Agreement we have in place with Abengoa.

And in that ROFO Agreement, we have a number of provisions under which it is in the interest we believe of Abengoa and these vehicles to negotiate in good faith with us based on market prices and therefore we expect to continue reaching agreement with Abengoa going forward.

Additionally, we are working on a number of acquisitions from third-parties and we believe that third-party acquisitions are going to be a very good complement through Abengoa's ROFO portfolio.

In fact on Page 15, we have summarized how much has the ROFO portfolio with Abengoa grown since the IPO, so this is our list of assets that were not listed in our list of ROFO assets at the time of the IPO. And that today are part of that agreement simply because Abengoa has won or advanced in the development of these assets.

Specifically Abengoa now has 400 megawatts of solar more in Chile and South Africa that are now part of our ROFO scope. Abengoa has 1,500 megawatts of conventional power in Mexico that are part of our ROFO scope. Abengoa has close to 300 miles of transmission lines in Brazil and Abengoa has got desalination plant that it didn’t have eight months ago.

This is a proof of the fact that having a developer and builder of assets like Abengoa as a sponsor is a very good idea for Uruguay. And we feel very strong about the capabilities of Abengoa to continue replenishing the ROFO going forward to make sure that we can grow as much as we can in the coming years.

Finally on Page 16, we are illustrating the growth we have been able to achieve through the first and once closed the second dropdown in renewable energy we've been able to grow from 700 megawatts to close to 1,100.

In transmission we have been able to grow from 1,000 miles more or less to close to 1,100 and we have been able to include water as a new category as we shared with you since the very beginning. With all of that today we reaffirm our guidance we gave in November updated guidance with $1.60 per share for 2015 and between $1.92 and $2 for 2016.

And based on the closing of 2014 and performance of the business in these early months of 2015, we reconfirm our guidance. With that I would like the moderator to open the floor for questions..

Thank you, Santiago and Eduard. We will now open the line to other participants for the Q&A Session. [Operator Instructions] Thank you. Our first question comes from the line of John Quealy from Canaccord Genuity. Please go ahead..

Well, so a couple of questions, Santiago on APW, can you comment on, I think Abengoa is talking about their deal with APW closing in March.

Can you talk about your side of the transaction? Do you think that's the similar timeframe for APW? And then also when Abengoa moves towards that sort of 40% ownership interest in ABY, if you could talk to us about any governance changes? Does EIG have a potential seat on the Board or how should we think about some of the corporate structure perhaps in the next six months or so? And I have a follow-up..

So regarding your first question Abengoa as they have publically stated is negotiating with our financial partner with EIG in order to create this investment deal called APW1 and reviving when they will close the negotiations, obviously we have nothing to do in that negotiation, this is between Abengoa and EIG and from our point of view the fact that Abengoa creates an investment vehicle is positive for us because it means that probably Abengoa is going to be able to invest more and to bid more contracted assets which is going to be good for ROFO but obviously we're not part of that negotiation and we're not part of such agreement, that's an agreement between Abengoa and EIG, the only thing that matters for us is a pre AW1 is going to sign the same ROFO agreement and therefore for the assets that go to that investment company, we will be in the future when the assets are built we will be negotiating with this entity, under the same ROFO Agreement.

And as I said before we feel very strong about our ROFO Agreement and we believe that regardless of with whom those negotiations happen we have the tools to reach reasonable agreements at market price. Obviously that agreement doesn't affect our corporate governance in any way.

APW1, I understand will have its own corporate governance and this is something that Abengoa is working on. But obviously our cooperate governance is not affecting in any way..

And then the second part of the question in terms of when Abengoa gets below 50% in the near-term here of ownership, can you talk to any planned change in the Board or anything from corporate governance perspective regardless of APW?.

So what we announced in December is that Abengoa Yield and Abengoa reached an agreement by which Abengoa would be moving in Abengoa yield to a minority from a director's point of view. So currently we have 10 directors, five are representing or related somehow with Abengoa, five are independent.

Abengoa agreed with Abengoa Yield that they would move to four directors related to Abengoa. Therefore the majority of the Board of Abengoa Yield is going to be independent directors in any case regardless of whether or when Abengoa loses its majority in terms of shareholding in Abengoa Yield..

And just a last one Santiago, obviously the ROFO Agreement with Abengoa is providing very good growth and visibility. Can you talk to your efforts on third-party potential acquisitions relative prices, relative geographies? There is a lot of infrastructure assets being shopped right now. And I would like to hear your perspective. Thanks very much..

So regarding third-party acquisitions we have been working in the last month on a number of opportunities. We’re looking at things in several geographies including the U.S. but not only in the U.S., the U.S.

market is fairly competitive at this point in time and has been so over the last year because of a number of new yield costs or a potential new yield cost very active in M&A and fairly aggressive, on top of our traditional players. Therefore we do look for opportunities but we need to find situations where we're sure that we're going to create value.

And additionally we're looking at other geographies where competition is less intense obviously it's never easy but where competition is a bit less intense..

[Operator Instructions] Our next question comes from the line of Andy Gupta from HITE Hedge. Please go ahead..

A couple of questions from me, I wondered in the past you have guided to long-term CAGR or distribution CAGR of 12% to 14%.

What should we expect past 2016, should we expect that sort of growth once you get the incremental from Mojave and some of the other projects coming online in '15 and '16?.

Beyond 2016 in terms of growth for our CAGR per share as many of you know we are little bit less aggressive than some of our peers and we like to answer that question without being very specific. Now what I can tell you when you look at our ROFO opportunities is that finding acquisition opportunities is not going to be the problem.

The ROFO with Abengoa is huge and the rate at which Abengoa is being able to renovate it and win new assets is very high therefore if you want our store is going -- is pretty full and it is going to continue being pretty full, so we can grow significantly.

How much is that? At the very least a low double-digit hopefully will be more but in any case together with the assets which can still grow in terms of cash generation on these acquisitions we should have a good number of years with a very significant growth.

And the fact that they don't drop numbers as high as some of our competitors does not mean that we don't target that internally it simply means that probably we're more cautious regarding mid-term and long-term targets..

One of the question is around Brazil and from what I understand again your exposure is pretty mitigated at least over the next five years with the press. But how are you guys thinking about Brazil given the current economic situation there, rising inflation possibly increasing the rates there.

How are you thinking internally about Brazil as a risk if at all or it's just five years out?.

The way think about this is first of all what you mentioned at the beginning for the next four years and a half our investment is fairly protected. As you know it's in dollars and that should cover we believe a good part of the economic cycle if Brazil went through an economic cycle let's say less favorable than the last year’s.

The second thing is the fear of inflation in Brazil actually we like inflation in Brazil, remember that in our contrast in many places the facility in Brazil there are provisions by which prices get increased with inflation therefore if Brazil had some inflation it would be good for the underlying assets in our investment in Brazil.

Of course what's good is some inflation not that situation that gets out of control but we believe that the country is far away from anything like that..

Our next question comes from the line of Andrew Hughes from Bank of America Merrill Lynch. Please go ahead..

Just in terms of the ROFO-3 acquisition that you have open negotiations for, can you give us a sense of whether that means the specific ROFO negotiation window is now open and there is some sort of timeline under which that process needs to unfold? And whether or not that potential acquisition presents upside to the calendar year 2015 EPS guidance or if it's more of a 2016 contribution to dividend?.

So let's say timing from a contractual point of view should not be an issue.

So our expectation is that it should take us I don’t know a couple of months maybe to reach agreements, but if it took us a bit longer it would not be a problem let's say both Abengoa Yield and Abengoa we're being very constructive regarding that and we shouldn't have any issue there.

Regarding whether the acquisitions could mean a growth in EPS in 2015 it's too early to tell now because we're still in early stages and it would depend exactly on how the final acquisition or acquisitions look like. Most probably there would be an impact '16 and I wouldn’t be able to tell you today how much of an impact we could expect in '15..

And then just in terms of looking at third-party acquisitions thanks for the color on geographies in particular, can you give us a sense of what’s -- how much seasonality in the production profile of the entire portfolio that you guys are operating comes into play whether or not you look at in terms of since more wind to offset the solar concentration or if that's a key consideration in the assets that you are looking at?.

I mean it is one of the things where we say it is that we like wind but we like wind up to a certain size in our portfolio because it's the more volatile part of our portfolio and we have a high payout ratio therefore wind is something we can look at but we would not do a massive acquisition in wind because of volatility.

Thanks to the fact that our portfolio is very international let’s say exposure to climate is lower than in other peers, so I don’t know in the first two months of 2015 the wind in some regions in South America has blown less than historically, but the sun in Southern Europe has been extremely high.

So that's why ourselves we didn’t feel anything because we have our folio where we compensate effects across technologies and across geographies. Therefore, I think that we can look at many potential acquisitions. We love borrowing assets like transmission lines, where you have only have to worry about the weather.

We also like solar, where volatility is lower and especially with geographic diversification from a portfolio point of view you cover that volatility. And we like wind up to a certain extent and today we are still far away from that wind limit if you want. So we're very open at this point in time..

Our current last question comes from the line of Sean McLoughlin from HSBC. Please go ahead..

Just a question around the operational performance, we are seeing good EBITDA margins across the various divisions. I'm thinking particularly in terms of solar, thermal in the U.S.

with Mojave still in ramp, I mean how should we think about the EBITDA margin in 2014? And what are kind of any operational risks that you can highlight on the ramp that we should be thinking about?.

So I will answer your second part of the question first. Mojave has started operations in late November early December.

And things have gone fairly well at this point in time for example our expectation is that February we are going to be where we should be, so we have very high capacity already and being able to either meet or slightly beat our budget for the month.

Therefore Mojave obviously no, things can break but Mojave in principal their ramp-up is very-very advanced and it's clearly behind us. Now in terms of what margin you should expect, I don’t know how we can help there, perhaps 2014 has been a little bit higher than the average we should expect, but I don’t see a big difference either..

And in terms of the actual duration of the ramp of Mojave, is this -- you say it's on-track.

But how much longer before you can say that you're fully ramped?.

So typically the way this works is in the first two or three months, you do most of the ramping up and you reach a plant that is able to deliver a nearly the production that you’re your technical model is saying the plant should be doing. And we are there we are in the 90s, let's say.

And then the last few percentage points, it takes you some time because you need to fine-tune and debottleneck some equipments in the plant and it can take you a few months let's say. But in general, most of the ramp-up is behind us..

Lastly just I think on -- we've had some concerns in the market about fires just I’d just like to hear your comment on that please?.

Yes we I guess you're referring to Solana?.

Yes..

And we did have two incidents there. The impact of those incidents was very small. There were two small fires that got extinguished through the automatic systems in the plant. These are things that obviously we don’t want to happen, but can happen in large installations like the ones we own.

That's why we have obviously a safety systems and fire systems at our facilities. After those incidents, we have done the normal analysis to understand why it did happened and we have taking advantage of the winter to reinforce our systems to make sure that this doesn’t happen and that we take no risks.

As you know during December, January and February, generation in our solar plant is significantly lower, so we took advantage of that to reinforce a number of our systems in Solana..

Ladies and gentlemen, there are no further questions in the conference call. Thank you..

Thank you very much..

Thank you..

Abengoa Yield full year 2014 earnings conference call is now over. You may disconnect your lines. Thank you..